Question

National income is equal to:

Options

• The sum of wages and rent only

• The aggregate value of intermediate goods

• The aggregate value of final goods output (GDP)

• The total money supply in the economy

Answer 1

Because total factor payments equal the value of final output, national income equals the aggregate value of final goods output (GDP). This income–output identity underlies the multiplier: any change in output immediately translates into an equal change in income.